News

Look who paid cash for Bay Area homes last year

By Pete Carey pcarey@mercurynews.com

Posted:
02/06/2013 12:09:47 PM PST

Updated:
02/07/2013 10:07:05 AM PST

Buyers seeking "the deal of a lifetime" paid cash in record numbers for homes and condos in the Bay Area last year, according to a report released Wednesday by the real estate information company DataQuick.

There were at least twice as many cash buyers in 2012 as there are in an average year in the East Bay, Peninsula and South Bay, the company said, reflecting a sharp change from the usual mix of buyers.

"There's an absolute incredible amount of cash buyers, more than we've ever seen since I've been around," said Joe Cutrufelli of Alain Pinel Realtors of Walnut Creek. "Some of these people are walking in with a million dollars cash" in their bank accounts.

Some are foreign buyers.

"There's tons of cash coming in now from China, India, and Russia," Cutrufelli said.

Others are U.S. residents looking for a safe place to put their money, fearing instability in the stock market and seeing lower returns from other investments, he added.

In a normal market, cash buyers would typically be empty-nesters and retirees downsizing to a smaller place with money from the sale of their former home, said DataQuick's Andrew LePage.

But in 2012, a quarter to nearly a third of all sales of existing single-family homes in the region were to cash buyers. A third to half of condos that changed hands went for cash, the company reported.

It all puts a squeeze on regular buyers with mortgages, who lose out to cash offers that can close in a few days.

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"Some people are coming up with more cash to put themselves in a competitive position when there are multiple offers, or because they either can't get a loan or they think real estate is a smarter place to park a chunk of their cash right now," LePage said.

"Today, a lot of buyers are chasing what they view as the deal of a lifetime," DataQuick President John Walsh said in a release.

Real estate agents on the Peninsula say they've seen large numbers of cash deals in the past year, with some reporting that 30 to 40 percent of the offers are for cash. The recent $117.5 million purchase of a Woodside estate is rumored to have been for cash.

About half the cash buyers statewide did not list the address of the home they purchased as their own address, a sign that they were investors. While some investors are individuals, others are hedge funds or private equity companies buying up foreclosures in large quantities from government-backed mortgage giant Fannie Mae.

Across California, about 28 percent of cash sales last year were to buyers of two or more properties, DataQuick said, for a total of 41,450 homes.

"It's difficult to compete with buyers who are all-cash or who make down payments that are 50 percent or more cash," said Tony Sum, a real estate agent who specializes in Silicon Valley condos.

Cash deals are "definitely a problem" for first-time buyers, said Suzanne Yost, past president of the Silicon Valley Association of Realtors. "With all the multiple offers and cash buyers, it's eliminating a lot of first-time buyers from the market, or making it more difficult for them," she said.

Many investors are buying with the intent to hold the homes they acquire for two to five years, she said, "with the idea that it will appreciate and they will make a lot of money."

But that reduces the number of homes for sale, making things even tougher for buyers, Yost said.

There were double-digit jumps in cash buyers from the previous year in every county of the inner Bay Area except for Contra Costa County, which was up just under 10 percent, according to the report.

More than 26,000 homes were sold for cash in the greater Bay Area, up from 22,292 in 2011, DataQuick said. Of those, 4,986 were in Alameda County; 5,766 in Contra Costa County; 5,415 in Santa Clara County and 1,948 in San Mateo County

Statewide, 45 percent of condo sales were for cash, the company said, compared with 31 percent of the sales of existing single-family homes.

Cash accounted for a record 32.4 percent of overall home sales, up from 30.4 percent in 2011 and double the average of 15.6 percent. The previous record was set in 2011.